Posted on 08/03/2005 4:51:43 PM PDT by RobFromGa
A simple question...
So, under the FairTaxI get to keep my whole paycheck, prices for everything I will buy will stay the same even with the taxes included, and I get a prebate check from the govt every month. And businesses pay no taxes.
Where is the extra money coming from...
What is wrong with this reasoning below?
1. Right now the government collects $X in the form of all taxes.
2. All taxes are really paid for by consumers in the end result, either directly, or in the cost of their purchases which allow businesses to collect money in order to pay taxes. Companies do not really pay taxes they jsut collect them and pass them on.
3. The FairTax will collect the same $X per year in the form of taxes but using a different method.
4. Under the FairTax, the price paid for goods will not rise because getting rid of all the taxes built into goods will cause the prices to drop, then the FairTax will add onto the new lower price, resulting in the same price paid by consumers.
5. So, for a given taxpayer, shopping (consumption) will be revenue neutral. Ie. Prices are the same as before.
6. And each given taxpayer will get a "prebate" check every month that they are not getting now.
7. And each taxpayer will pay no taxes on capital gains, or on savings.
8. And, each taxpayer will no longer pay any taxes on income, or payroll taxes.
9. And, there will be no Fair Taxes on any purchases made for a business.
Are these all true so far?
Again, I get to keep my whole paycheck, prices for everything I will buy will stay the same even with the taxes included, and I get a prebate check from the govt every month.
Where is the extra money coming from???
The embedded taxes is the best answer. Think about it this way: If I am going to pay $100 for something later under the current tax laws or I'm going to pay $100 later under the Fair Tax, I'm going to pay $100 either way. Am I going to be worse off? Shoot no. If I'm so good at saving money, I can now put money into savings, retirement plan or not, tax free and it will grow tax free.
That was not my question.
If I earn $ 40,000, my employer is required to pay an additional $ 3,060 ( 7.65% ) in matching Social Security / Medicare contributions under current law.
So, my question is, if Fait Tax is enacted will my employer be writing me checks for $ 40,000 per year or $ 43,060?
The economists who wrote the letter referenced in an earlier post said that people would be getting 100% of their salaries. I do not believe that in the real world, employers are going to pay the additional 7.65% to the employees.
To respond to your reply to my admittedly cynical post: obviously, the employer is not going to continue sending money to the government. The employee agreed to work for X dollars per hour, so how is giving them X dollars per hour fraud?
What say you?
Uh huh. Something like saying that we would be sending out a trillion rebate checks a year?That's a little less fundamental than knowing how to calculate the tax paid.
Who said anything about Jimmy Carter?
Of course they can but fear of an IRS audit is a strong detracting influence.
Only if one files a return, the problems lay in those that don't and deal in cash. The size of the underground cash economy is estimated to be as high as 25% of GDP, that is totally outside of reporting umbrella and not tracked by any govenment agency and not paying federal income or payroll taxes.
Audits only happen when the IRS is aware of you. Stay below their radar screens as many do guess what evading income taxes for indefinite periods of time is quite achievable when their are over 120 million potential tax return filers to hide out behind. Note to think about there are less than 20 million business filers, and more 80% of dollar volume flows through less than 20% of those business representing the largest ones.
Bless her heart.
Thanks for the links, I'll check them out. I agree that the Boortz/Linder book is very poorly referenced. Michael Crighton did a better job in his book State of Fear, and that was fiction.
I am learning a lot from the information on this thread.
I think it is important that the FairTax crowd recognize that they have the burden of proof in this case to sell their plan and answer all valid questions.
They are the ones who want to radically change our system, and they could be right about this plan, but it is the height of arrogance for them to expect everyone should roll over and accept this on faith. John Linder is a good man, so they have that going for them.
That's hardly a body-slam (except maybe of yourself). Read my response on that thread, Superman. I think you'd best not go one on one with Boortz since you can't even handle little old me.
Why body-slam my good friend Nightie??? He does it to himself.
Try the link again. It works for me. I know they are getting a lot of traffic with the book out. I heard they anticipated it and got a new server but they were being overwhelmed with hits!
Thanks for the links, I'll check them out. I agree that the Boortz/Linder book is very poorly referenced. Michael Crighton did a better job in his book State of Fear, and that was fiction.If you want my opinion, so is Boortz's! :-)
Post 221 wasn't yours, but if you mean the question about why you are paying income taxes if there is enough paid by corporations in their embedded tax costs to fund the government, I addressed it in a post above this one but below 245.
I got on and posted my questions re: the link earlier today. Just a suggestion, you should just read quickly through to the end of the thread and get caught up, then you can go back and reply to old posts later.
Chatting with you is like chatting with someone on Pluto with a seven hour radio transmission delay time.
Most business don't deal with 50 states.
"Under FairTax:
1. Who will be responsible for checking whether this is a valid business expense?
2. How will they catch it?
3. What will businesses need to do to protect themselves from being called a NRST tax cheat?
4. Will businesses still need a 'Tax compliance department' to protect themselves from going to jail?
5. If so, doesn't this negate some of the Fair Tax arguments that a) we get rid of the horrible, all-powerful tax auditing agency (IRS has morphed into something else) and b) that compliance costs under NRST will be cut to zero?"
Legitimate concerns, no doubt. Here is how I understand it will work.
All retailers will charge the sales tax if it is an item that is potentially for personal consumption. The purchaser will file a request for reimbursement on a monthly basis. That accomplishes a couple of things.
(1) It relieves the retailer from having to figure out who is legitimately entitled to buy tax-free.
(2) It builds a file that the sales tax authority would be able to use to spotlight abuse.
That isn't to say that Americans won't abuse the system to some extent. There is no system that is abuse proof. However, when one considers the enormous reduction in points of collection/enforcement and the enormous decrease in the complexity of the system being administered, it just makes sense.
Will a sales tax create a different set of compliance challenges than an income tax has? Absolutely. That does not mean, however, that those challenges cannot be met with AT LEAST the degree of success that we have demonstrated with an income tax. I strongly believe that we will get higher rates of compliance with the FairTax than we do with the current system with much lower compliance costs. For me, that is more than good enough.
I just thought of something as I was typing this out. If I were in charge of NRST compliance, I would develop an audit program for these refund files. The ones that revealed suspicious patterns would be the ones that I would send field auditors out to inspect. You could probably develop a list of questions from that file that could be answered very quickly and easily.
That would be different than the audit for those collecting and remitting the sales tax, of course, but that, too would be relatively trivial compared to an income tax audit.
That's hardly a body-slam (except maybe of yourself). Read my response on that thread, Superman. I think you'd best not go one on one with Boortz since you can't even handle little old me.You're embarrassing yourself. PM AG if you have to and he'll explain you are wrong.
Why body-slam my good friend Nightie??? He does it to himself.
Actually under the FairTax he would only be taxed when he purchased taxable items at retail and not when money was removed from the bank.
Also, not everyoine is taxable - for example used things are not taxed and many people buy used cars and used houses right now.
It's just something that is going to have to be addressed. Everything you have mentioned is subject to abuse under the current tax laws though.
He's still for it, though.
Most businesses of any size send sales people to travel in many of the 50 states as well as all over the world. So they would be subject to audit for their Holiday Inn room bill in Wenatchee, Washington as well as their lobster dinner in Kennebunkport, ME.
That brings up another point, business expenses spent in a foreign country (Like a german trade show) are currently deductible from a business' profits. I guess with no income taxes it really doesn't matter about the foreign expenses, there will be no tax forms to record these items on anyway.
This no income tax stuff is hard to grasp the way it will all actually work.
I can understand you being concerned about the prices coming down. Even if you don't believe they will come down at all, remember this. When people don't have anything withheld from their check they will have the money to pay the tax. We're not saying nobody is going to be paying taxes. That would be stupid. Some people will pay more, some less. It all depends on how much you spend. I plan to pay less because I am going to save more. At least I have the opportunity to do that before taxes under the Fair Tax.
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